Education secretary Michael Gove on a school visit. Newham Free Acadamy in east London has been withdrawn from the programme due to lack of parent demand. Photograph: Eddie Mulholland / Rex Features

One of the coalition's flagship free schools has collapsed weeks before it was due to open, apparently because there was too little demand from parents.

The Newham Free Academy, in east London, which advertised a "no-frills high-quality traditional education" and was preparing to open in September, has been withdrawn from the free schools programme, ministers have confirmed. Free schools are meant to prove evidence of parental demand before winning approval to set up.

Schools which receive approval are given state funding for the costs of building or converting premises.

The Department for Education has published details of the capital costs for the first wave of free schools, ranging from £177,500 to convert a private school to £6m for a primary school in north London.

The government also provides funds, known as "lead-in costs" so that the school's backers can develop detailed plans, including drawing up a curriculum, and recruit a headteacher.

The collapse of the Newham school emerged after the shadow education secretary, Stephen Twigg, asked, in a parliamentary question: "How many pupils have applied to join the Newham Free academy in September 2012?"

The schools minister, Nick Gibb, replied: "Following careful consideration, we have judged that the proposal to establish Newham Free academy has not progressed sufficiently for it to proceed to opening and it has been withdrawn from the free school programme."

The school was due to open with 180 places in each year group, and its founders claimed to have "developed large community links in Newham with many parents and families worried about secondary school provision in their local area."

The collapse of the school underlines concerns that the free schools programme is not sufficiently focused on areas of need.

A study by the thinktank RSA recently described free schools as an "unguided missile". It said: "The impact of free schools would be enhanced if they were developed strategically in localities where new places are needed or where there is school failure, rather than investing in extra capacity in areas where the school system is performing well."

In 2011 57% of 16-year-olds in Newham's state schools achieved five GCSE passes including English and maths, just below the national average of 58.9% – a remarkable achievement in the second most deprived borough in the country.

Labour has accused Michael Gove, the education secretary, of focusing on "pet projects".

Twigg said: "We have learned today that another free school plan has collapsed at the 11th hour – just weeks before the school was due to open. At a time when education funding is being cut by the biggest amount since the 1950s, the government must explain how much money has been spent on failed projects like these.

"Ministers need to get a grip on this programme to ensure money is not wasted on projects that are unlikely to succeed."

It emerged last month that Beccles Free school in Suffolk had just 37 applications for children to join in September. Demand is critical because funding depends on the number of pupils a school attracts.

The Newham school is backed by a private organisation, Redeemer Educational Services Ltd. The school's founders are listed on its website as Funmi Gbadeyan, a former headteacher and science teacher, and Sade Bright, a former councillor in Hackney, east London.

The school's website declares: "We are an ordinary group of people, parents and families who wish to open a new secondary school in Newham."

The school planned to make French, German, Spanish or Mandarin compulsory to 16, and all pupils would have done at least eight GCSEs, including history and science.

The backers proposed to divide pupils into houses to "foster interaction, unity, promote leadership skills and competition". It is not clear whether the school had found a site before it was dropped from the free schools programme.

GCSE schools guide

Interactive: This guide is designed to help parents find and research local schools in England. Search by postcode to find which schools offer individual subjects, and compare how they have performed in GCSE exams